There’s currently lots of analysis around at the moment demonstrating that companies that maintain or even increase marketing spend during a recession do better than competitors when the market improves, and do no worse (in terms of profit) than competitors during the recession.
An analyst called Tony Hillier from WARC has looked at the marketing and financial records of 1,000 companies held in the PIMS database, and classified them depending on whether their marketing spend had increased, decreased or remained stable during recession. He found that when the economy recovered, on average, those which had reduced their marketing spend experienced a small fall in profits. Those which had maintained marketing spend experienced a small increase. But those which had increased spend in the recession logged a substantial increase in profits during the economic recovery.
In a similar vein Professor Patrick Barwise of the London Business School has come up with three positive strategies for coping in a recession:
· Look for new creative, targeting or media opportunities. Slower market conditions can create new possibilities.
· Strengthen your market position against weaker rivals, through your marketing strategy.
· Keep going. The advantages of maintaining or increasing marketing effort are greater than the short-term benefits of reducing spend. Maintaining or growing ‘share of mind’ is much less expensive than trying to rebuild it later on.
The Financial Times have produced a few special reports lately on recession marketing and came up with a nice four scenario model based on combining two dimensions of brand equity at the onset of the recession and brand investments in the recession.
An analyst called Tony Hillier from WARC has looked at the marketing and financial records of 1,000 companies held in the PIMS database, and classified them depending on whether their marketing spend had increased, decreased or remained stable during recession. He found that when the economy recovered, on average, those which had reduced their marketing spend experienced a small fall in profits. Those which had maintained marketing spend experienced a small increase. But those which had increased spend in the recession logged a substantial increase in profits during the economic recovery.
In a similar vein Professor Patrick Barwise of the London Business School has come up with three positive strategies for coping in a recession:
· Look for new creative, targeting or media opportunities. Slower market conditions can create new possibilities.
· Strengthen your market position against weaker rivals, through your marketing strategy.
· Keep going. The advantages of maintaining or increasing marketing effort are greater than the short-term benefits of reducing spend. Maintaining or growing ‘share of mind’ is much less expensive than trying to rebuild it later on.
The Financial Times have produced a few special reports lately on recession marketing and came up with a nice four scenario model based on combining two dimensions of brand equity at the onset of the recession and brand investments in the recession.
Brands in cell (1) run the distinct danger that their equity will be significantly eroded in the current recession. They start from a favourable position, but their behaviour will lead to a significant weakening of their position vis-à-vis private labels and the brands in cell (2). Managerial decision-making for these brands is overly cautious and focused on the short-term. These brands should emphasise activities that keep their customers satisfied (and, hence, retain them), rather than focus on cost-saving activities. Indeed, customers lost during the recession may never come back, even when the economy’s outlook improves again.
For brands in cell (2), the recession is an opportunity to pull ahead of their short-sighted competitors in cell (1). Their proactive behaviour will strengthen their (relative) position, not only in the recession period, but also in subsequent years. Brands in cell (3) are in the worst possible situation: they start weak, and their management makes the wrong decisions. They are prime candidates to be de-listed by retailers who are pushing their private labels in recessions – and many of them will. Their brand equity will decline, and many will not even survive the recession.
The brands in cell (4) have the opportunity of a lifetime to fight back. They start in an unfavourable position – their equity is low and, in normal times, it would take tremendous marketing investments to break through the competitive clutter. However, given that most brands cut back in recessions (and, hence, belong to cells (1) and (3), brands in cell (4) are able to increase their share of total market communication in the category dramatically by maintaining or – even better – increasing their marketing investments. But it is a risky strategy – if it is poorly executed, the anticipated increase in sales and profits will not materialise and the brand may be discontinued. The message is clear – keep marketing for success. Now the trick is persuading those holding the purse strings.
Interesting links:
- FT Special Report
- WARC
For brands in cell (2), the recession is an opportunity to pull ahead of their short-sighted competitors in cell (1). Their proactive behaviour will strengthen their (relative) position, not only in the recession period, but also in subsequent years. Brands in cell (3) are in the worst possible situation: they start weak, and their management makes the wrong decisions. They are prime candidates to be de-listed by retailers who are pushing their private labels in recessions – and many of them will. Their brand equity will decline, and many will not even survive the recession.
The brands in cell (4) have the opportunity of a lifetime to fight back. They start in an unfavourable position – their equity is low and, in normal times, it would take tremendous marketing investments to break through the competitive clutter. However, given that most brands cut back in recessions (and, hence, belong to cells (1) and (3), brands in cell (4) are able to increase their share of total market communication in the category dramatically by maintaining or – even better – increasing their marketing investments. But it is a risky strategy – if it is poorly executed, the anticipated increase in sales and profits will not materialise and the brand may be discontinued. The message is clear – keep marketing for success. Now the trick is persuading those holding the purse strings.
Interesting links:
- FT Special Report
- WARC
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